AMP has been slapped with a $5.175 million fine for failing to prevent breaches of best interests duty and for making a total of six contraventions of section 961L of the Corporations Act.
The embattled wealth giant copped the $5 million penalty after some of its financial planners engaged in “rewriting conduct.” This practice of “churning” clients into new insurance policies when there is nothing wrong with their existing policies, in order to generate higher commissions, exposes these clients to underwriting risks.
The federal court found the rewriting conduct of AMP’s Rommel Panganiban was “morally indefensible,” and that AMP’s “lack of an effective response” after having known of Panganiban’s conduct illustrates “how badly things had gone wrong within the organisation.”
“This penalty proceeding reflects a lamentable failure of corporate will to take the necessary steps to prevent greedy and unlawful conduct taking place, and a further failure to adopt a swift and proper remedial response,” the court said.
“ASIC [Australian Securities and Investments Commission] had a strong case against AMP, which resulted in AMP’s admissions in relation to ASIC’s case in May last year,” said Daniel Crennan, ASIC deputy chair. “We now have a decision from the court which agrees with ASIC’s case that AMP failed to monitor and supervise its financial planners properly and in accordance with its legal obligations. ASIC believes the penalty applied by the court… will act as a deterrent to AMP and other financial institutions to engage in such misconduct.”
The court also said it will make orders requiring AMP to undertake a review and remediation program to ensure clients who were subject to rewriting conduct are detected and properly remediated, as well as a forward-looking compliance plan to prohibit rewriting conduct of AMP’s financial planners.
The penalty was determined under the previous penalty regime where the maximum penalty for each contravention was $1 million. For contraventions that have occurred since March 2019, penalties have increased with civil penalties now capped at $525 million.